Lt. Gov. Brian Calley signs law offering incentives for enhanced oil recovery at Western Michigan University

KALAMAZOO, MI – With half a million linear feet of core
samples as a backdrop, Michigan Lt. Gov. Brian Calley signed a package of bills
into law Tuesday that provides incentives for an oil recovery method that retrieves
more oil and natural gas from existing wells while sequestering carbon dioxide
deep underground.

"I must say, you have a really cool rock collection going,"
Calley told WMU President John Dunn before the signing.

"It's an honor to be back on campus," Calley said. The signing "recognizes
the strength of the partnership state has with WMU. This is an outstanding
place for us to take a step forward help both entrepreneurs and the government
to make intelligent, scientific, fact-based policy decisions."

Saying that MGRRE had "played a critical role in the legislation being signed today," Dunn called the repository "an amazing resource for Michigan's citizens."

Under a bill sponsored by state Rep. Aric Nesbitt, R-Lawton,
enhanced oil recovery projects will be taxed at a 4 percent severance rate,
rather than 6.6 percent for oil and 5 percent for natural gas. The oil and gas
severance tax generates about $60 million for the general fund each year.

The process is more expensive than
traditional methods, but is considered the most cost-efficient method of carbon
capture and sequestration, Calley said.

With enhanced oil recovery, liquidized carbon dioxide is
injected more than 2,000 feet underground, often in existing oil and natural gas
well-bores, allowing companies to retrieve about 20 percent more of the "stranded"
oil left behind by conventional drilling. The carbon dioxide remains behind,
sequestered underground.

"In the case of CO2, there is the added benefit that COT that would otherwise be emitted into the atmosphere is being sequested in geologic formations that have proved capable of storing it for 300 million years," said John Wilson, one of the founders of Core Energy, of Traverse City, at Tuesday's signing.

In an interview with the Kalamazoo Gazette last month, Core Energy said that, since 1997, it has used the process on seven old oil fields in
Michigan to retrieve 1.6 million barrels of oil that otherwise would
not have been retrieved. Wilson estimated that an additional 200 million barrels in the state potentially
could be captured using the process – about 30 times Michigan's annual output.
At today's prices, he said, the potential value of the oil is $20 billion.

"Michigan
is committed to the wise use of its natural resources," Calley said.
"Providing incentives to fully develop old, traditional oil fields
benefits consumers and our economy. Protecting our environment while fueling
our economy is a win for everyone."

On Tuesday, Calley also signed three additional bills that promote the use of
enhanced oil recovery. HB 5254, sponsored by state Rep. Rick Outman, R-Six Lakes; HB
5255, sponsored by state Rep. Thomas Stallworth III, D-Detroit; and HB 5274,
sponsored by state Rep. Peter Pettalia, provide for the exercise of
eminent domain when laying pipelines to transport carbon dioxide.

After the signing, Nesbitt pointed to the fact that his bill
passed the state House 85 to 25 as an example of its bipartisan support and
thanked Stallworth for his work on the issue. Nesbitt
said he believed the incentives were necessary, since the process is more expensive than conventional
drilling.

"I believe this is a valuable first step," he said, calling
it a "win-win-win" for jobs, domestic energy output and the environment. "This
will help put Michigan on the map."

The law does not apply to the controversial
practice of hydraulic fracturing, commonly known as fracking.

However, after the laws' passage, environmentalists
and Democrats questioned the need to offer more incentives to oil companies. They said any environmental benefits
from carbon sequestration should be weighed against new pipeline
construction, well conversions, additional
air pollution and costs and environmental impacts of increased transport
of oil.

"Giving more tax breaks to big oil companies
just shows that this administration is out of touch, and has the wrong
priorities for Michigan," said Mark Schauer, the Democratic candidate for
governor, in a statement. "At a time when dozens of Michigan school districts
are in deficit because of Snyder's education cuts, the last thing we should be
doing is giving more handouts to big oil companies. Instead, we should be
investing in clean, renewable energy sources to reduce our dependence on
foreign oil and create good Michigan jobs."

The Sierra Club's Michigan Chapter and Clean Water Action also expressed dismay
about the law's signing.

"Our elected officials should not be
reducing state revenue and giving tax breaks to companies who put our Great
Lakes, rivers, and streams at risk," said Nic Clark, Michigan director of Clean Water Action. "We should be moving Michigan away from our dependence
on corporate oil to clean energy, not pandering to oil and gas companies."

And the Sierra Club specifically took issue with the extension of eminent domain.

"This
law poses an alarming new threat for all Michigan residents who are facing
aggressive oil, gas and related pipeline construction in their
communities. The Sierra Club strongly opposes the expansion of
eminent domain authority to private oil and gas companies at the expense of the
rights of private property owners and the public," said Anne Woiwode, director
of the Sierra Club Michigan Chapter, in a statement. "Giving oil and gas companies more
ability to take lands for the transportation of fossil fuels and carbon dioxide
pipeline development is the wrong decision for Michigan, for clean water, and
for property owners."

For his part, Nesbitt pointed to a 2008 National Resources
Defense Council paper that found that "to date, no significant documented
environmental impacts from CO2 injections, such as groundwater sources, have
been reported."

The report went on to note that, "as with any other
oil-extraction process, responsible operations are essential and sound regulations
can help minimize any surface or subsurface risks."

In Michigan, enhanced oil recovery projects only can be
undertaken with the specific approval of the Michigan Department of
Environmental Quality.

"This legislation is something I believe will position Michigan
to fully utilize the resources we have in the state in an environmentally sound
matter," he said.

Saying that the process has been studied both publicly and
privately for 30 years, Nesbitt called enhanced oil recovery safe and effective and pointed out
that the process is typically used to more fully utilize old, depleted wells, rather
than drill new ones.

"Would they rather have CO2 released into the atmosphere or
stored underground while getting more domestic energy?" he asked of critics.

Correction: This article has been updated to correct the spelling of Nic Clark's name.